The effects of threshold policies on individual effort in uncertain outcomes

Yosuke Kimura

Economics Letters, 2024, vol. 241, issue C

Abstract: There are situations where the rewards associated with an outcome differ based on whether a certain threshold is exceeded. This paper examines how the threshold affects individual effort levels and the performance distribution. When performance uncertainty is small, only individuals near the threshold increase their effort. In contrast, large performance uncertainty increases the likelihood of exceeding the threshold, motivating more people to exert costly efforts. Consequently, the distribution can be either unimodal or bimodal. These findings suggest that examiners can effectively enhance the overall performance of an assessed population by appropriately setting the threshold and managing score uncertainty.

Keywords: Threshold; Bimodal distribution; Effort; Uncertainty (search for similar items in EconPapers)
JEL-codes: D80 I21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524002933

DOI: 10.1016/j.econlet.2024.111809

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